Which is Better: HSA or HRA? A Comprehensive Comparison

Choosing between a Health Savings Account (HSA) and a Health Reimbursement Arrangement (HRA) can be a daunting task. Both accounts offer valuable perks and tax advantages, but they have key differences that can impact your healthcare and financial planning. Let's dive into a detailed comparison to help you decide which option may be better for you.

Health Savings Account (HSA)

An HSA is a tax-advantaged savings account available to individuals enrolled in a high-deductible health plan (HDHP). Here are some key points to consider:

• Contributions are tax-deductible.
• Funds roll over from year to year.
• Withdrawals for qualified medical expenses are tax-free.
• Portable - you own the account and can take it with you if you change jobs.

Health Reimbursement Arrangement (HRA)

An HRA is an employer-funded account that reimburses employees for eligible medical expenses. Here's what you need to know about HRAs:

• Employer contributions are tax-deductible.
• Unused funds may roll over at the employer's discretion.
• Employees do not own the account.
• Accessible only while employed by the sponsoring employer.

When comparing HSA and HRA, consider factors such as control over the account, portability, and rollover options. Your healthcare needs, employer offerings, and financial goals will also influence your decision.

When deciding between a Health Savings Account (HSA) and a Health Reimbursement Arrangement (HRA), it's essential to weigh not just the tax advantages, but also how each option aligns with your individual health needs and financial strategy.